We are in the midst of an epochal upheaval. New technologies, new drive options and digitalization are leading to the transformation and realignment of the entire vehicle industry. Intensified by the Corona-related collapses, the need for forward-looking innovations and investments is increasing. With new developments and investments, the vehicle industry can succeed in emerging stronger from the crisis.
Bringing together crisis and innovation – leveraging R&D projects
Even before the Corona pandemic, the automotive industry was in a state of flux and had to prepare for a realignment. Amplified by the economic downturn, the question now is how to safely navigate through the crisis. While interim aid from the federal government helps in the short to medium term, it does not secure long-term transformation.
This is where innovations and investments come into play. But R&D projects and new acquisitions cost money and thus represent a risk. Additional burdens for already beleaguered companies. With the right subsidies, innovations and investments can be financed on a pro-rata basis – without having to pay back the subsidy. Personnel will also continue to be tied up by being deployed in the relevant projects. The end result is new products, processes or business processes that can be used to pick up speed again.
The German public sector provides a number of funding options for this purpose, which support companies in repositioning themselves on the market – while at the same time mitigating the risks and costs of transformation. Three funding opportunities are presented below:
- 35 c: Investing in the future for the automotive industry
- The research allowance: Tax-based research funding
- ZIM – the Central Innovation Program for SMEs
The 35c economic stimulus package provides new impetus for future investment
The German economic stimulus package (Kopa 35c) contains a subsidy package of around 1.5 billion euros for future investments by the German automotive industry. A total of three modules are designed to strengthen the competitiveness of the vehicle industry on a sustainable basis and thus lead out of the crisis and into the future. The core elements of the grant are future investments in digitization (Industry 4.0), new technologies and products, and employee training. A key focus is on the transfer of knowledge and technology from science to industry in order to advance the transformation of the German automotive industry.
Note: The directive is expected at the end of February 2021. Only then can binding statements be made about funding levels, requirements and application.
Core elements of the grant
At its core, the funding is expected to consist of three key elements:
- Production & investment grants: Funding for R&D projects as well as investment grants related to the value-added process
- Product: Expansion of existing R&D funding New vehicle and system technologies (innovations for the vehicle, for surrounding systems and mobility of the future)
- Innovation clusters: Funding of regional innovation clusters – the cluster organization is funded – however, R&D projects arising from this can be funded via A and B.
Who is supported in 35c?
Companies can apply for grants for R&D projects if they have a link to the vehicle or supplier industry and are based in Germany. Research institutions and universities can also apply for grants, as can associations or public institutions. These can also be funded via subcontracts in the project. For investment subsidies, there is an additional focus on supporting SMEs.
Retroactively promoting R&D projects with the fiscal research allowance
Since 2020, the law on fiscal research allowance for short, has been in force. R&D projects can be subsidized retroactively in the form of a tax refund. The federal government is making a total of 5.6 billion euros available for this purpose until 2024.
Who can apply for the research allowance?
All companies subject to tax in Germany are eligible for funding, regardless of their size, sector or technology. In addition, subcontracts can be funded; here, 60 percent of the costs apply as the assessment basis.
How does the research allowance provide funding?
The assessment basis is the employer’s gross salaries for the R&D project. The upper limit is 4 million euros. The funding rate is a flat 25 percent. This means that companies can receive up to 1 million euros in funding.
Applying for the research allowance
The application process is structured in two stages: First, a certificate of innovation activity must be applied for. This can be done before, during and after the project. The certification office reviews the application and issues the certificate. Only with this approval can the research allowance be applied for at the end of the business year at the tax office. This determines the amount of the subsidy.
ZIM projects – technological innovation support for SMEs
ZIM, the Central Innovation Program for SMEs, is a technology and industry-neutral innovation promotion program for small and medium-sized enterprises. For the year 2021, the federal government is making 633 million euros available for this purpose.
Who can apply for ZIM funding?
Primarily, companies with up to 500 employees are eligible to apply. Larger companies, up to 1,000 employees, can also apply for ZIM funding, provided they cooperate with at least one SME. Research institutions can also receive the grants, provided they are involved in the R&D project by an SME.
How does the Central Innovation Program for SMEs provide funding?
Employee gross salaries are used as the basis for assessment. In addition, subcontracts can be compensated with ZIM funding. For companies, there is also a 100 percent flat rate on personnel costs. Both individual and cooperative projects are eligible for funding. Furthermore, in so-called innovation networks, several companies and research institutions can jointly launch new R&D projects across disciplines with the help of ZIM funding. In addition to the actual ZIM funding, there is the possibility of testing subject areas in preliminary studies or tests through ZIM feasibility studies. Following a ZIM project, ZIM services for market introduction can also be used to prepare market entry. The amount of funding depends on various factors, such as the size of the company, the project form or the location.
Applying for ZIM funding
ZIM applications can be submitted to the responsible project management agencies at any time. It is also possible to submit project outlines in advance, so that applicants receive an assessment from the project management agencies in advance. The actual ZIM application is quite extensive and can comprise several 100 pages. It can take around three months until approval. After approval, the funds can be called up on a quarterly basis. Due to Corona, a monthly call is currently possible.
Use advice to find the right funding
Grants and their application are often complex for the applicant to navigate, guidelines, requirements and application too intransparent and too extensive. This can be remedied by technical consulting companies, which assist in the selection and application of subsidies. This significantly increases the chances of success and allows companies to concentrate on their core activities, as the consultant takes over the application process. The time saved on internal resources alone usually pays for itself. Quality standards, such as ISO 9001 certification or authorization from the German Federal Ministry of Economics (BMWi) in the go-Inno program, can provide orientation when selecting a consulting firm.
Dr. Jörg Rupp
Jörg Rupp holds a doctorate in engineering and an MBA in business administration with over 20 years of experience in innovation, technology and funding. After an international career in start-ups, medium-sized companies and corporations, he founded the company DORUCON – DR. RUPP CONSULTING GmbH in 2011.
phone: +49 681 976 898 10